[gnicholas]

Former international tax lawyer here. This would not be possible because these benefits are largely based on international structures, and any non-US corporation owned by a few US-based individuals would be designated as a Controlled Foreign Corporation (CFC). This would prevent you from reaping the biggest benefits from a taxation perspective.

The reason that publicly-traded companies are not CFCs is that a CFC must have 50% of the vote or value of the company owned by US Shareholders. "US Shareholder" is defined as a US person that owns at least 10% of the company. So even if a conglomerate is almost entirely owned by US persons, it would not be a CFC unless the US persons that own it also meet the 10% threshold.

The reason for this cutoff is that the CFC rule is meant to prevent small groups of people who can actually exercise control over a foreign company from getting together and colluding to keep profits off-shore. But this is not a risk in the case of companies whose ownership is spread among many small shareholders. As a result, big companies are able to take advantage of complex international structures in ways that small groups of individuals cannot.

[modeless]

So 7 people could form a corporation to do this? One owns 49% and the rest 8.5% each. Or 11 people if you want equal shares for all.

[gnicholas]

Yes, but it would be very difficult to coordinate their overlapping/conflicting interests. It could work in the case of family members, whose interests are generally more aligned. But the tax code allows the IRS to attribute ownership among related persons. So you can't do this sort of thing with people who are close blood relatives, otherwise the ownership structure can be collapsed, and it won't work.

[buzer]

> The reason that publicly-traded companies are not CFCs is that a CFC must have 50% of the vote or value of the company owned by US Shareholders.

Aren't there some public companies where some people have over 50% of the votes? Facebook comes to mind as one. Or are their international subsidiaries designated as CFCs?

[gnicholas]

You're right, it looks like Zuck has 60% of the voting power of FB. [1] I wouldn't be surprised if FB's tax lawyers came up with a creative way to structure their international operations so that not all of their foreign subs are CFCs.

1: https://www.vox.com/recode/2019/5/30/18644755/facebook-stock...

[sooheon]

So small groups of individuals can take advantage of this given they are international enough?

[bobthepanda]

Presumably, people who are international enough aren't being taxed by the US in the first place.

[sooheon]

But who would have their own government taxes to dodge.

[gnicholas]

Many countries do not tax their residents on a worldwide basis. So if a person from Country X earns money in Country Y, they are simply not taxed on it in Country X. They don't need to set up a complicated foreign corporate structure to avoid immediate taxation, as US residents do.